Four things every investor needs to know

You've probably heard the expression "elevator pitch". Where does it come from? Here's the derivation I learned on Wall Street.

You show up for a meeting with an investor. Slide deck in hand, you're prepared to spend a half hour on your presentation and another 20 minutes answering questions. Instead s/he says, "I'm sorry. I'm double-booked and running late. Walk out with me."

Now you get to tell your story in the time it takes the elevator to reach the lobby. Don't panic. Remember, there are just four things every investor needs to know.

How large is the market?

Unless the market is large enough, they don't care about what comes next. But you can't just say "trust me, this is a billion-dollar opportunity." Start with an assertion that anyone can agree with and build your case from there. For example, as the baby-boom generation ages, the proportion of adults over 65 will grow dramatically. That's why our [new treatment for an an age-related illness] could be worth [$x billion] dollars.

What does the company do that's special?

Describe the core of your competitive advantage. Paint the picture with words that your grandmother would understand. What's your team's big discovery? What can you do that others can't?

How will you turn this advantage into a business that makes money?

Don't try to recite Chapter Five of your business plan (assuming it even exists). The best way to describe your business model is by analogy to another successful company. If you can't find a useful example you either haven't done enough research or your may need to rethink your business model. And remember, the key is a story that makes money for investors.

What I should worry about, but not too much?

Every great opportunity has risks. Indeed, successfully overcoming risks is how entrepreneurs create value. Yet human nature will tempt you to avoid the weakest points of your story.

Do the opposite. Know what your harshest critic would say and tackle those concerns head on. This inspires confidence. And it inoculates the investor against simply passing on your company if someone else raises those same risks after you've left the room.

Now you know

Remember these four things every investor needs to know. You'll make better pitches, whether in an elevator or a conference room. And if you're not sure you've got it just right, give us a call.

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